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Report: UK operators losing £136m to premium rate fraud

UK operators are said to be losing around £136 million a year to fraudsters targeting premium rate mobile services, according to a new report by revenue assurance firm BillingScore.

The study claims that nearly 20 per cent of all premium rate transactions conducted by UK operators are fraudulent, with the problem likely to become worse unless action is taken.

According to BillingScore CEO Chris Newell, this criminal activity is being conducted in various ways. This can include setting up bogus charity schemes or false content download services, with the fraudsters then making payments to these dummy organisations using stolen credit card data. The mobile operator is then deceived into paying these "fake firms" believing them to be legitimate.

"Each transaction would take roughly one to two minutes to complete, meaning they could make up to £150 an hour or nearly £10,000 a week for minimal effort," Newell told Total Telecom.

BillingScore maintains that mobile operators have tacitly accepted a level of premium rate fraud by providing for it within the billing charges. Most UK operators apply a 30 per cent levy on premium rate transactions to cover the cost of bad debt and fraud.

Commenting on these findings, Teresa Cottam, research director at UK analyst firm Telesperience, said that the extent of this problem had been hidden with the costs built into operators' existing business models.

"Everyone in the mobile industry knows that fraud, bad debt and other types of revenue loss are a major issue--yet hardly anyone talks about it," said Cottam, as reported by Mobile Today. "The mobile sector simply cannot afford to continue haemorrhaging money in this way; nor can it keep hitting honest customers in the pocket in the form of higher charges, simply because it has failed to address the losses."

The BillingScore study warns that, with the expected growth in mobile application storefronts, in-app payments and NFC usage, operator billing is set to increase significantly. The firm predicts, for example, that revenue from in-app payments is likely to grow by 600 per cent this year.

"Sticking your head in the sand and hoping the problem will go away is not a viable strategy for the operators," added Cottam.